BY MAUREEN N. MARATITA
King’s Restaurants will expand into two Guam villages, doubling the number of its locations.
David A. Alcorn, president of GFS Group, parent company of King’s told the Journal it will open restaurants in Dededo and Mangilao, starting with the Dededo location in summer 2021. “We’re looking at a June start,” he said.
The restaurants will be slightly smaller than the current two locations, he said. “They’ll be right around 5,000 square feet/165 seating capacity. We don’t see the need for larger stores at the moment — based on the future and what we’re seeing at existing stores. The bigger stores energy-wise are too much to handle right now.”
Alcorn said GFS is being cautious. “Construction cost isn’t down enough yet, although material cost is dropping and just the energy of running the building — the air-conditioning — they’re 24-hour environments. We need to think about the long-term liability stuff.”
The 24-hour service has always been a popular feature of King’s Restaurants. “In normal times — pre-COVID — late night could be as much as 30% of the revenue,” Alcorn said.
King’s is opting for long-term ground leases for the locations, he said. “And then we build the building.” King’s prefers that option, he said.
“The Dededo one is right across from GRMC on Marine Drive. “It’s almost a corner lot,” he said. “It’s a pad site. … We’re roadside; freestanding.”
The Dededo restaurant will be in a location that is likely to boom as Camp Blaz – the U.S. Marine Cantonment is developed. Traffic is already drawn to the area by the Guam Regional Medical Center.
Alcorn said he is not able to disclose the Mangilao location yet.
The upcoming restaurants will add about 170 people to King’s 170 existing employees. Alcorn said 85 per location will include the management teams of a general manager and four assistant GMs. “Each location is self-sustained,” he said.
The King’s brand has sustainability, Alcorn said. “It seems to really be a comfort food for people from all walks of life. There’s just something about that brand. It is the 45 years we’ve been here; maybe it’s everything about that brand collectively.”
That is not the case with other GFS brands, such as Ruby Tuesday.
“It’s underperforming dramatically,” Alcorn said. “We’re considering our options with that. We’ll continue to run it to the end of the year as best we can, but we’re not sure what corporate’s going to do.”
For the Guam market, he said, “We’re looking at options. We’re highly considering making that an independent operation.” Alcorn said GFS would retain the lease fronting Chalan San Antonio. “We like the space; we’ll keep it.”
Chuck E. Cheese will close, Alcorn confirmed, before its lease ends in October. That restaurant is also at GPO. “We’re in wind down. We’ve sold off the inventory now. We’re doing about 400 customers a day, which is very impressive. We’re quite surprised. At that rate it will be another four weeks or so maybe, we’ll be out of inventory.”
He is unaware what the landlord will do with the space, he said. “There’s an option on the lease that we’re not picking up.”
Alcorn said GFS anticipates a lot of changes in the restaurant business in Guam. “We do understand and are accepting the fact that the next six months there will be a lot of restaurants that will decide this is not worth it anymore.”
Occupancy spaces will become vacant in Tumon, Tamuning and Hagatna when some restaurateurs decide it’s no longer feasible for them to stay in operation, he said. “They are saying some four million restaurants in the states will fail; and that means some 45 to 50 restaurants could fail in Guam.”
For restaurants, the margins are based on volume, he said. “It’s the extra 15% to 20% of the topline sale where you’re making your money. In today’s market, if you’re not getting the topline sales … then you’re losing money.”
The adjustment has to be power or occupancy costs such as rent, he said. “The next big compression is rent and leases have to come down to proper values. I think a lot of landlords are going to be making a decision in the future, ‘What am I going to do? Leave the space empty, or collect something?’’
Quick return investment landlords will face challenges, Alcorn said. “But the longer term landlords who have been doing this for a long time they’ll look at it [and say] ‘Well, we can adjust it to make it realistic for the next six months.’ That’s the kind of deals that will be going on.”
Alcorn said he assumes that everybody in the restaurant business has already been renegotiating their lease.
GFS has been doing well with large-scale catering. Kings Tamuning was contracted by the Navy to feed personnel of the USS Fitzgerald when the ship visited Guam in March. “It was just a little short of 4,000 meals for breakfast, lunch and dinner… for a seven-week period. That really was a great lift for our business,” he said. Converting the restaurant was a little challenging, but he said it was a good contract to have. “At one point the entire galley was shut down and we were feeding everybody on the ship.”
GFS catering clients include the U.S. Department of Defense Education Activity lunch program, the Guam Department of Education school lunch program with SODEXO, the Naval Hospital Guam contract and the Guam Regional Medical City contract. In addition, the group caters to military personnel in off-island locations.
Additionally, GFS operates Popeyes, Del Taco and Dominos on Guam’s military bases.
The restaurant business will remain part of GFS, Alcorn said. “It’s part of our core capability that we’ve had for a very long time. I came from that background. My kids like it and they are the future.”
Alcorn says the restaurants have been a lucrative part of the business. “Right now, it’s a downturn, but I think 2021/2022 it’s going to pop around again and it will be okay.”
Additionally, he said it maintains the relationship with the community. “It keeps us connected.” mbj